Profit warnings from travel & leisure firms fall to 7-year low

Profit warnings issued by FTSE travel and leisure companies fell to their lowest level in seven years in 2021 despite the sector experiencing another challenging year, according to EY-Parthenon’s latest Profit Warnings report.

In total, it said the FTSE travel and leisure sector, which also includes restaurants and bars, issued just 11 profit warnings in 2021, from 16% of the sector. This compares with the record 74 profit warnings issued in 2020 in the height of the pandemic.

EY added the low level of profit warnings “reflects the impact of record earnings downgrades in 2020”, but also the “positive impact” of certain government support measures and how well businesses in the travel and leisure sector have adapted over a year which began with a lockdown and ended with the Covid-19 Omicron variant.

Meg Wilson, turnaround and restructuring partner at EY, said: “Despite a challenging year, which included continued travel restrictions and reduced air passenger numbers, the travel industry has shown remarkable resilience. Looking ahead to 2022, pent up demand for summer holidays, record levels of personal savings and a rebalancing of consumer spending from products to experiences should support a much better year ahead for international leisure travel.

“However, there are still hurdles to overcome. Whilst the UK is further relaxing obstacles to travel, variability in destination markets remains. There is uncertainty surrounding the timing of bookings and the extent of business travel reductions, which will result in different recovery speeds across the sector. Margin pressures also haven’t gone away and the pass-on of costs may become harder as the cost-of-living squeeze intensifies.”

She added: “Inevitably some companies will struggle to adapt, and some will be vulnerable to failure. But for travel companies who draw upon their experience, resilience, and agility, and tell a compelling long-term value story, the opportunities are significant.”